Frank Kane

Saudi Aramco signaled renewed confidence in the recovery of demand for oil by raising its prices for June supply of crude from the low levels of the past two months.

The company announced its official selling prices (OSP), showing increases over May across virtually every grade of crude. Only little-traded “super light” was cut further in a range of price increases that went from $1 per barrel for crude destined for American markets to rises upwards of $6 a barrel for crude bound for European and Mediterranean trading zones.

In the the critical Far Eastern market — the “battle ground” among oil producers — prices were increased from between $0.9 to $1.7 per barrel over May for different grades of Aramco crude.

The OSPs — the actual price at which Aramco is willing to sell oil — are eagerly watched by traders as an indicator of sentiment at the world’s biggest oil company.

The oil price war of April was kicked off when Aramco offered big discounts to customers in early March just as global demand for crude fell off a cliff on the effects of the worldwide lockdowns that hit economic activity.

The price of Brent crude, the global benchmark, jumped back above $30 after the prices were announced, up 6 percent to $31.64 in Gulf afternoon trading.

For Asia, which consumes most Aramco crude, the OSPs are calculated against Middle East crude benchmarks DME Oman and Dubai. DME Oman rallied to around $32 per barrel after the Aramco prices were announced.

Paul Young, head of energy products at Dubai Mercantile Exchange, told Arab News: “These OSPs are for June-loading crude, so with the record OPEC+ cuts and demand returning, fundamentals should look much more balanced by the time this oil hits the market as refined products in the third quarter.”

Market analysts took the OSP rates as further positive news after a week when some have declared the worst to be over after a turbulent month for global energy markets. Oil analyst Arjun Murti tweeted: “With demand showing early recovery signs, Saudi is helping to further boost recovery.”

Some took the relatively high prices on offer to European markets as a concession to Russia, which became Saudi Arabia’s partner in the historic OPEC+ cuts a couple of weeks ago after a big falling out at the beginning of March.